2. Multinational Organizations
Organizations that conduct business operations across
national borders are called international firms or
multinational corporations.
Multinational corporations (MNCs) face unique &
diverse risks, such as :
Expropriation of assets
Currency losses through exchange rate fluctuations
Unfavorable foreign court interpretations of
contract or agreement
Social/political disturbances
Import/export restrictions, tariffs and trade
barriers.
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3. Advantages of International
Operations
1. Firms can gain new costumers for their product.
2. Foreign operations can absorb excess capacity, reduce unit
costs, and spread economic risk over a wider number of
markets.
3. Foreign operations can allow firms to establish low-cost
production facilities location close to raw material and / or
cheap labor.
4. Competitors in foreign markets may not exist, or competition
may be less intense than in domestic markets.
5. Foreign operations may result in reduced tariffs, lower taxes,
and favorable political treatment.
6. Joint ventures can enable firms to learn technology, culture
and business practice of other people and to make contacts
with potential customers, suppliers, creditors and distributors
in foreign countries.
7. Economies of scale can be achieved from operation in global
rather than solely domestic markets.
8. A firm’s power and prestige in domestic market may be
significantly enhanced if the firm competes globally.
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4. Disadvantages of International
Operations
1. Foreign operations could be seized by nationalistic
factions.
2. Firms confront different and often little-understood
social, cultural, demographic, environmental, political,
governmental, legal, technological, economic, and
competitive forces when doing business
internationally.
3. Weaknesses of competitors in foreign lands are often
overestimated, and strengths are often
underestimated.
4. Language, culture and value systems differ among
countries.
5. Gaining an understanding of regional organizations is
difficult but is often required.
6. Dealing with two or more monetary systems can
complicate international business operation.
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5. The Global Challenge
China
- China has more than 1.3 billions residents and
dramatically growing middle class anxious to buy
goods and services.
- Yum Brands – owner of KFC & Pizza Hut, reported in
2011 China division overtook the U.S. in profits
generated.
- GM’s sales in China exceeded GM’s sales in US for
the first time ever in 2010.
- Wynn & Las Vegas Sands report that their net
revenue in China triple their U.S. properties.
- The fastest-growing market for pocket book maker
Coach.
- The second-largest market for Dell.
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6. The Global Challenge
Brazil
- Business in Brazil is booming, with more
than 7% growth in GDP in 2011.
- Rio de Janeiro is making massive
preparations for the 2016 Summer
Olympics.
- $5 billion investment program to extend
the subway system, improve railroads and
construct new highways.
- Petrobras become the world’s fourth-
largest oil producer.
- Vale is the largest iron-ore mining company.
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7. The Global Challenge
The lineup of competitors in virtually all
industries is global.
General motor, Ford, Chrysler vs. Toyota
& Hyundai.
General Electric, Westinghouse vs.
Siemens & Mitsubishi.
Caterpillar & John Deere vs. Komatsu.
Goodyear vs. Michelin,
Bridgestone/Firestone, & Pirelli.
Boeing vs. Airbus.
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8. Globalization
Is a process of doing business worldwide, so
strategic decision are made based on global
profitability of the firm rather than just
domestic considerations.
Monitoring globalization in one’s industry is
an important strategic management activity.
Knowing how to use that information for one’s
competitive advantage is even more
important.
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9. Corporate Tax Rates Globally
Corporate tax rates vary considerably
across countries and companies.
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10. United States versus Foreign Business
Culture
To compete successfully in world markets,
U.S. managers must obtain a better
knowledge of historical, cultural, and
religious forces that motivate & drive
people in other countries.
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11. United States versus Foreign Business
Culture
U.S. Managers have a low tolerance for silence,
whereas Asian managers view extended periods of
silence as important for organizing and evaluating
one’s thoughts.
U.S. Managers rush to appointment, conference
and meetings then feel productive but for many
foreign managers, resting, listening, mediating, and
thinking is considered productive.
Sitting in conference without talking is
unproductive in U.S. but viewed as positive in
Japan.
Marketing managers in Japan see making a sale as
the beginning, therefore they strive to achieve
“everlasting consumers” whereas many Americans
strive to make a onetime sales.
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12. United States versus Foreign Business
Culture
Some important cultural differences between U.S.
and foreign managers (Rose Knotts) :
1. U.S. managers more interested in business
than people.
2. Personal touching and distance norms differ
around the world.
3. Family roles and relationship is vary different
countries.
4. Business and daily life in some societies are
governed by religious factors.
5. Time spent with the family and the quality of
relationship are more important in some
countries.
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13. United States versus Foreign Business
Culture
6. Many cultures around the world value
modesty, team spirit, collectivity, and patient
much more than competitiveness and
individualism.
7. Punctuality is a valued personal trait when
conducting business in the U.S.
8. To prevent social blunders when meeting with
managers from other lands, one must learn
and respect the rules of etiquette of others.
9. Americans often do business with individual
they do not know, but in Japan or Mexico, an
amicable relationship is often mandatory
before conducting business.
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14. Communication Differences Across
Countries
Cultural Hints from Charis Intercultural
Trainings provided by Forbes :
1. Italian, Germans & French generally do
not soften up executive before they
criticize. American do, so its seems
manipulative to Europeans.
2. Israelis are accustomed to fast-paced
meetings and have little patience for
American informality and small talk.
3. British executives often complain that
American executives chatter too much.
4. Europeans feel they are treated like
children when asked to wear name tags.
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15. Communication Differences Across
Countries
5. Executives in India are used to interrupting
one another. Thus, when American executives
listen without asking for clarification or
posting questions, they are viewed by Indians
as not paying attention.
6. When negotiating orally with Malaysian or
Japanese executives, it is appropriate to allow
periodically for a time of silence. However, no
pause is needed in Israel.
7. Refrain from asking foreign managers
questions such as “How was your weekend?”
is intrusive for foreigners, who tend to regard
their business and private lives as totally
separated.
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16. Business Culture Across Countries
Mexico
• Employers seek workers who are agreeable,
respectful & obedient than innovative, creative
& independent.
• Mexicans workers tend to be activity oriented
than problem solvers.
• Mexican business stress collectivism,
continuity, cooperation, belongingness,
formality, and doing exactly what you’re told.
• Mexicans do not accept criticism and change
easily, many find it humiliating to acknowledge
having made a mistake.
• Mexican workers want to be closely supervised,
cared for and corrected in civil manner.
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17. Business Culture Across Countries
Mexico
• Mexicans often do not follow the rules.
• If visiting a Mexican home bring flowers or sweets,
except Marigold as they symbolized as death or red
flowers which have a negative connotation. Arrived
30 minutes late but definitely not early.
• If receive gift, open immediately and react
enthusiastically.
• For business appointment, it is best to arrive on
time, although Mexican counterparts may be up 30
minutes late.
• Mexicans are very status conscious, so business
title and rank are important.
• Face-to-face meetings are preferred over telephone
calls, letters, or e-mail.
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18. Business Culture Across Countries
Japan
• All corporate activity in Japan encourage Wa among
managers and employees.
• Wa requires that all members of group agree and
cooperate.
• Entertaining is an important business activity in
Japan because it strengthens Wa.
• Most Japanese Manager are reserved, quite,
distant, introspective, and other oriented.
• In Japan, a person’s age and status are of
paramount importance.
• Greetings in Japan are very formal and ritualized.
• Wait to be introduced, even in a large gathering.
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19. Business Culture Across Countries
Japan
• The traditional form of greeting is to bow, the
deeper you bow, the more respect to show.
• In gifts, chocolates or small cakes are excellent,
don’t give white flowers that are associated with
funeral.
• Give items in odd numbers but avoid the number 9.
• Gifts are not opened when received.
• Japanese prefer to do business on the basis of
personal relationships than impersonally speaking
over the phone or by written correspondence.
• We need to be a good correspondent to effectively
do business with Japanese.
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20. Business Culture Across Countries
Japan
• The Japanese are looking for a long-term
relationship.
• Always give a small gift as a token of your
appreciation and present it to the most senior
person at the end of any meeting.
• The Japanese are nonconfrontational, in
communicating with Japanese, phrase questions so
that they can answer yes.
• Business cards are exchanged in Japan constantly
and with excitement.
• Business cards are generally given and received
with two hands and slight bow.
• Examine any business card you receive very
carefully.
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21. Business Culture Across Countries
Brazil
• If going to someone’s house in Brazil, bring hostess
flowers or small gift, avoid purple or black, as these
are mourning colors.
• Arrive 30 minutes late for dinner and up to an hour
late for party or large gathering.
• Always err on the side over-dressing in Brazil rather
than under-dressing.
• Avoid embarrassing a Brazilian by criticizing an
individual publically.
• It is considered acceptable to interrupt someone
who is speaking.
• Face-to-face, oral communication is preferred over
written communication.
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22. Business Culture Across Countries
Brazil
• As for business agreements, Brazilians insist on
drawing up detailed legal contracts.
• Brazilians take their time when negotiating.
• Appointment are commonly cancelled or changed in
last minute.
• In Sao Paolo and Brasilia, arrive on time for meetings
but in Rio De Janeiro arrive a few minutes late.
• Do not appear impatient if you are kept waiting.
• Brazilians pride themselves on dressing well, so men
should wear conservative, dark colored business suits
and women should wear suits or dresses that are
elegant and feminine with good quality accessories
and manicures are expected.
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23. Business Culture Across Countries
Germany
• Business communication is very formal, only close
friends and relatives are invited to their house.
• Consider that an honor if you get invited to their
house and bring gift, such as chocolate or yellow
roses or tea roses, but not red one which symbolize
romantic intentions, also do not bring carnations,
lilies, or chrysanthemums which symbolize
mourning.
• Germans more interested in a businessperson’s
academic credentials and their company’s
credentials.
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24. Business Culture Across Countries
Germany
• Appointments are mandatory and should be made one
two weeks in advance.
• Punctuality is extremely important, if you are going to be
delayed, telephone immediately and offer an
explanation.
• It is very rude to cancel meeting in last minute and this
could jeopardize your whole business relationship.
• German meetings adhere strict agendas, including
starting and ending times.
• Germans maintain direct eye contact while speaking.
• There is a strict protocol to follow in Germany when
entering room.
• Business decision making is autocratic and held at the
top of the company.
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25. Business Culture Across Countries
Egypt
• Greeting are based both social class and religion.
• Handshakes are always given with a hearty smile
and direct eye contact.
• If invited to Egyptians' home, don’t bring flowers,
which are usually reserved for wedding or the ill.
• Egyptians prefer to do business with those they
know or respect, so expect to spend time
cultivating a personal relationship before business
is conducted.
• Always accept the beverage offered because
declining is viewed as rejecting the person.
• Appearance is important, wear conservative clothes
and present yourself well at all times.
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26. Business Culture Across Countries
Egypt
• Direct eye contact is a sign of honesty.
• Business meeting generally start after
prolonged inquiries about health, family, etc.
• Personal relationships are necessary for long-
term business.
• Business move in slow pace and society is
extremely bureaucratic.
• They are tough negotiator and do not like
confrontation or having to say “no”
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27. Business Culture Across Countries
China
• Chinese have an excellent sense of humor.
• In terms of gift, a food basket makes an
excellent gift but do not give scissors, knives, or
other cutting utensils, as these objects indicate
severing relationship.
• Never give clocks, handkerchiefs, flowers, or
straw sandals, as they are associated with
funerals.
• Do not wrap gifts in white, blue, or black paper.
• 4 is unlucky, don’t give four of anything, 8 is the
luckiest number, so giving 8 of something is
great idea.
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28. Business Culture Across Countries
China
• Your position on an organizational chart is
extremely important in business relationships.
• Punctuality is very important in China. Arriving
late to a meeting is an insult and could
negatively affect your relationship.
• Never ask the Chinese to turn off their mobile
phones during meetings as this cause you both
to lose face.
• The Chinese are shrewd negotiators, so your
initial offer or price should leave room for
negotiation.
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29. Business Culture Across Countries
India
• Gender disparities at Indian company grow
more pronounced at higher level of
management.
• Indians believe that giving gifts ease the
transition into the next life.
• Gifts of cash are common but do not give
frangipani or white flowers as they represent
mourning.
• Indians generally do not trust the legal system,
and someone’s word is often sufficient to reach
an agreement.
• Titles are very important in India.
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30. Business Culture Across Countries
Nigeria
• Endowed with vast quantities and natural
resources and being 6th largest oil-producing
country in the world, Nigeria has a well-
educated and industrious people who are
proud of their country.
• Extended families are still the backbone of
social and business systems.
• Nigerians are generally outgoing and friendly,
especially in southwest, where the Yoruba
often use humor even during business
meetings and serious discussions.
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31. Business Climate Across Countries /
Continents African Countries
• By 2020, McKinsey & Co. predict that consumer
spending in Africa will double to nearly $1.8 trillion,
up from about $860 million in 2008.
• From 2000 to 2009, foreign direct investment in
Africa increased 600% to $58,56 billion.
• Wal-Mart recently acquired South African retailer
Massmart Holdings for $4.6 billion, providing the
company with 290 stores in 13 African countries.
• Africa has the world’s largest deposits of platinum,
chrome, and diamonds – and many Chinese
companies in particular are investing there.
• From 2011 to 2014, yum Brands is doubling the
number of KFC outlets in Africa to 1,200 and aims
to double its revenue to $2 billion.
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32. Business Climate Across Countries /
Continents African Countries
• Ghana recently became Africa’s newest oil
producing nation when the 1.5-billion-barrel Jubilee
field began pumping oil.
• Ethiopia is also doing very well economically.
SABMiller PLC recently invested $20 million in a
manufacturing plant in Ethiopia’s large city, Ambo.
• Nairobi, Kenya, is the center of several major
telecom companies trying to gain market share in
the rapidly growing African cellphone business.
• McKinsey & Co. estimates that within five years
another 220 million Africans that today can meet
only basic needs will join the middle class as
consumers.
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33. Business Climate Across Countries /
Continents CHINA
• China recently pass Japan to become world’s second
largest economy with a GDP about $5.75 trillion
annually, compared with Japan $5.4 trillion.
• However, China is still emerging economy, as indicated
by a per-capita $4,000, compared to U.S. $47,000 and
Japan $42,000.
• China’s economic growth of over 9% annually for
several decades.
• Goldman Sach predicts that China will overtake the
United states as the world’s largest economy in 2027.
• China rapid growth has created substantial pollution,
extensive inequality, and deeply embedded
corruption.
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34. Business Climate Across Countries /
Continents CHINA
• China has become the biggest trading partner for
Australia, Japan, Korea, India, Russia, and South Africa
and has replaced The United States as the top export
market for Brazil.
• China and India announce that they will double their
bilateral trade in 2010 and 2015 to $100 million. This
increase cooperation between China and India is good
news for companies worldwide.
• From the table of Sampling of Asian Countries in
terms of doing business rankings, China ranks 79th out
of 183, for a variety reasons ranging from human
rights issue to substantial disregard for
copyright/patent/trademark.
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35. Business Climate Across Countries /
Continents PHILIPPINES
• A highly educated, English speaking country, the
Philippines overtook India in early 2011 in call-center
jobs, employing 350,000 compared with India
330,000.
• Philippines president Benigno Aquino recently
indicated that services outsourced to the Philippines
from around the world will generate up to $100 billion
in 2020, representing 20% of the global offshoring
market share.
• Hundred of thousand Filipinos work outside the
country.
• The television advertising market in Philippines is
nearly $4 billion annually, larger than India’s and on
par with Indonesia’s.
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36. Business Climate Across Countries /
Continents TAIWAN
• Taiwan has a dynamic, capitalist, export driven
economy with gradually decreasing state
involvement in investment and foreign trade.
• Real annual growth in GDP has average 8%
during the past 3 decades.
• Taiwan is rated 33rd among all countries in the
world for doing business.
• Taiwan’s total trade in 2010 reached an all time
high of $526 billion, according to Taiwan
Ministry of Finance.
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37. Business Climate Across Countries /
Continents INDIA
• India’s progress in just two decades is one of the
most stunning achievement in human history.
• India’s rating is 134 out of 183 because that country
still requires foreign firm to form a joint venture
with an Indian firm in order to do business.
• India’s inflation is high and beureaucracy slow down
all business.
• Various economic reports predict that by 2015,
India will outpace China’s annual GDP growth of 8.5
– 9.5. Various trends as increasing of labor force, a
high saving rate, massive structural reforms the
government continues to undertake, and increase
infrastructure spending, lead to this conclusion.
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38. Business Climate Across Countries /
Continents GERMANY
• As Europe’s debt crisis has pushed the euro
lower, German goods are more competitive
abroad.
• German automobile producers have fallen
behind rival in mass-producing electric cars.
• Germany now faces shortage of skilled labor and
aggressive recruiting from abroad for country’s
top engineering and scientific talent.
• Germany might need to follow the lead of Italy,
which has the same problem but has enacted
excellent new laws and incentives to both keep
and attract young, highly educated professional.
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39. Business Climate Across Countries /
Continents MEXICO
• More and more companies such as Electrolux
and Whirlpool have recently reduce their capital
expenditures in Mexico because of spiraling drug-
related violence.
• Other crimes such as robbery, extortion, and
kidnapping are climbing.
• The most violent city in Mexico is Ciudad Juarez.
• As indicated in table, Mexico has fallen to 35th out
of 183 countries in term of doing business.
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